Babysitting Indian economy

In 1930s young US senators with babies had a problem. Senators and their wives normally attend a lot of parties and babysitting cost was huge. So they formed a cooperative among themselves where they baby sit each other whenever they don’t have parties. Co-op issued tokens that can be exchanged for an hour of babysitting. Therefore to use tokens they had to be earned. The system was thus equitable.

Due to unforeseen circumstances, the number of tokens in circulations became low. A few nervous senators were more willing to baby sit than attend parties. This exacerbated the situation as the token circulation became fewer. The co-op had fallen into a recession.

The co-op tried to regulate the group by making it mandatory for senators to go out at least twice a week. But it was found that the problem was not legal but technical. They then found a more viable alternative.

The co-op gave out more tokens. The situation became normal as more tokens were now in circulation. But the co-op overdid it. Now everyone had a lot of tokens and no one was willing to baby sit; a different kind of recession.

Instead of simply offloading more tokens into the market, Co-op allowed lending of tokens for an interest. So if interest rate is 5%, the senators should return 105 tokens for every hundred borrowed. Now whenever there is a sign of recession all they had to do is change the interest rates. When circulation is fewer, lower the interest rate and in case of a glut, raise it.

This is the gist of the influential paper on macroeconomics "Monetary Theory and the Great Capitol Hill Baby-Sitting Co-op Crisis." By Joan and Richard Sweeney, Journal of Money, Credit, and Banking (1977). Where is the connection?

Tokens - money, cooperative - RBI.

What happens when the government wants to encourage savings and discourage spending? The RBI prior to 1990s maintained a high interest rate regime. Banks gave a high interest on FDs and charged a high interest on loans. As a result there was a lot of saving and little spending and Indian economy crawled at a hindu rate of growth of 3-4% of GDP. It was only after the reforms and a low interest regime did the spending was stimulated, demand picked up and there were more investment in productive capacity of the economy resulting in high growth.

What happens during liquidity overhang – the cute expression means a lot of tokens in circulation, thereby raising inflation? RBI raises interest rates. This is precisely what RBI did September last year when it increased cash reserve ratio (CRR)-reserve maintained by banks with RBI by 50 basis points (0.5%). Money was sucked up, people bought less, demand lessened and inflation was put under control.

So next time you see something about interest rates, monetary policy, inflation or recession, extend the babysitting theory. It is worth a year of studying macroeconomics.          

Short memoir

Writing a resume is second most thing i detest (Asking questions
on my resume comes first). Why? Because resume means we have
to think about ourselves. And when i think what I have done vis-a-vis
my more illustrious peers, i feel sick. So what happens when a resume
for the summers internship is required? Procrastination.

I write the smallest things i have done, in not so small terms. I give
it to some seniors for feedback, and what do they tell? Add more to
points which i haven't and cut crap in things which i have. For eg,
Wrote a lot of things about my online trading. Portfolio, risks
etcetera.For christsake! seniors tell me, these are finance companies.
Don't dare teach them share trading.  Ugh, that's an interesting
perspective, i tell them, but no, that doesn't save my face. I manage
to send the resume five minutes before deadline.

I had a strange visitor at my room, Mr.Scorpion. I stay away from my
room while my roommate sounak stomps it to death. Yours truly is
so kind hearted to see even a scorpion die, you see. Boy! this place is
a zoo- snakes, scorpions, profs....and not least of all, myself.

I get a romantic SMS in the middle of the night.
"CLOSENESS resides in heart... no matter how far apart we are, you
are always remembered. " I am not annoyed at all to be woken
up, thank you. I call this number and ask in the sweetest possible
voice, who are youuuuuu? Sriram (Kumbaks) replies 'dei, this is my
new number'. 'OH! Ummm.. okay err... how are you, kumbaks?'

We had a weird understanding at our organizational behaviour(its
basically pshychology) class. Ask doubts that uses some words
unconnected with the subject- abortion, i love u, cardboard, ceramic
to quote a few. So we did managed a few - 'sir, if mom affirms child
with 'i love u' message, how does that have an impact on child's
Cognitive ability? Sir, is cardboard an effective channel for
communication impact on listener? Yours truly goes overboard:
sir, are relations like ceramic in that once broken can't be mended?
or can it?' Prof says wah! kyah class participation.

Rest in next.    

Management Accounting decoded

Course objective: To understand accounting as an aid to managerial
decision making.
My Objective: to know just enough to chat intelligently with an accountant

Course description: case studies - show how companies manipulate
their books to evade tax in order to throw light on transparency and
good corporate governance
My description: Don't use the same ways to manipulate lest you will get caught

Tryst with mid term exams

Day 1: Organizational Behaviour
Important terms: motivation, attitude, blah power n
Type: objectives 120 in one hour (negative marking minus 1)
two case studies:one hour

Writes bulldung(substitute with s**t!) for half an hour and
thought he's done with. Looks around. Everyone still writing
furiously. Panic. Wrote a couple more pages of bulldung. feels much
better.

Day 3: Management accounting
Important terms: inflation accounting,forward contracts, deferred tax
credit(i made up these! ha ha)
Type: normal lenghty paper

Sees Qn paper. Cries silently. looks around. Everyone doing the
same.feels much better.

Day 4: Fore noon: Law (3 hours)

Case: A promises a car to B. A did not give the car. Can B claim it?
Verdict: Justice Honorable Sivananth emphatically says NO. Gives
reasons which sounds like yes. WHAT CRAP? strike strike.

A.N: Communication (3 hours)
given: A picture: few people with binoculars.
Qn: Interpret the picture briefly.
Looks intently for awhile. Has no clue. Writes "The people don't seem
to know what to look for. Neither do I." (I look forward to Prof
reading this to the class! Boy! i already built a reputation)

Note:other days were uneventful.
Disclaimer: The author asserts his right to imagination(some parts are
true!).

Sivananth's day out

8:15 am: Sounak chatterjee (my room mate) screams "utto! kitna sota hai tu!"

8:35 am: mess - gobbles up bread, cornflakes and
eggs(omlette,scrambled). one friend remarks "you take eggs in
different forms" Replies "Eggs are like religion! They take different
forms but reach the same destination!!!" Friend runs for cover.

9:00 Accounts class
Asks a doubt on something. prof as usual replies "why don't u tell
us?" Arey, how often should i prove my idiocy. notes down the
hundredth time not to ask doubts again.

10:10 IT class
first day:Brags for a long time on uses of IT. Uses the board and
ohp. Qn to prof:"why don't u use IT? Where is the ppt slides?"
Calls the undersigned "Mr.IT" ever since.

11:30 Stats
New prof a girl, a lookee(looker:one who looks;lookee:one who can be looked at) I will teach u more english in the coming issues.

afternoon:sleep(sleeps 10hrs a day)

8:30 pm: mess - there is a talk on moving a no confidence motion
against current Class rep. and making me one instead! Notes down
to run a secret campaign (they hold proper elections here) before
that prospective day.

9:30 pm: hostel - nothing significant to do. writes this mail

See u in next issue
Sivananth

IIM L vanished

By our special correspondent
Lucknow, 19th of August.

Two weeks have passed since Indian institute of management, Lucknow
completely vanished on the face of the earth and intelligence agencies
are still clueless about the mystery surrounding it.

Readers may be aware of the shock waves that reverberated throughout
the world immedietly after the incident. Fortunately there were no
direct casualties although two guards died of heart attack. PM
Dr.Singh who was on trip to the US immedietly cancelled his trip.

Immediet reports suggested that it may be the handiwork of
terrorists.International community rallied behind India in these
sordid cicumstances. US President Bush expressing solidarity with
Dr.Singh said "At this tragic time, we will stick with our friends
and stick it into our enemies". British premier "desperately
condemned" the incident.

Many theories abound the mystery. One was that P.C.Sorkar made it
disappear but forgot to bring it back, although the magician has
vehemently denied it.

It is also possible that it is the handiwork of Dr.Murli manohar
Joshi because IIMs refused his fee structure. Because of the
political implications involved, the government has ordered Justice
Nanivathi commission to enquire how he was behind this.

The commission report tabled in the parliament recently said "It is
certainly probable that it is the handiwork of terrorists and not
uncertainly improbable that Dr.Joshi is behind this".

Because of the complex jargons involved, this correspondent sought
a statistics expert to decode the matrix. According to expert,
"Certainly probable is an oxymoron, though under boundary
conditions probability means certainity". When pressed about what
uncertainly improbable meant, the expert sneezed incessantly so no
comment could be sought.

The government's initial ATR(action taken report) said no action can
be taken on probabilities, due to left pressure, CBI enquiry has been
ordered. Disclosing this in Question hour Dr.Singh solemnly declared
"Rationale is one;conscience(decode-Left)is quite another. The
government respects its own conscience and hence this decision".

Regarding the future of students, Dr.Singh assured the house that
they will be accomodated in other IIMs. But some students like
sivananth complained to this correspondent that they are once again
put in a waitlist.

Reuters
Note:
This style is called you-guessed-it-right, satire.
Post 7/7 attacks on london when an innocent brazilian was shot, Blair
is quoted as saying "We are desperately sorry" which i found
desperately amusing. Bushism is genuine. As for as other quotes, you
will enjoy it better if you are up to date,eg. nanavathi report.